The Database Architecture Question#
For cloud ERP, database architecture is one of the most significant decisions affecting data isolation, performance, compliance, and cost. Understanding the options is essential for informed vendor evaluation.
Multi-Tenant Architecture#
In multi-tenant architecture, multiple customers share the same database infrastructure. Data is logically separated but physically co-located.
Implementation Approaches#
Shared database, shared schema: All customers share the same database and tables. A tenant identifier column separates data. This is the most cost-efficient but provides the weakest isolation.
Shared database, separate schemas: All customers share the database instance, but each has a separate schema. This provides better isolation while maintaining some cost efficiencies.
Separate databases, shared infrastructure: Each customer has a dedicated database, but databases run on shared server infrastructure. This provides strong isolation with moderate cost.
Advantages#
Cost efficiency: Infrastructure costs are spread across multiple customers.
Simplified maintenance: The vendor applies updates once for all customers.
Resource pooling: Unused capacity from one tenant can serve others.
Disadvantages#
Noisy neighbour problem: Heavy usage by one tenant can affect performance for others.
Limited customisation: Schema changes affect all tenants.
Data isolation concerns: Software bugs could potentially expose data across tenants.
Compliance complexity: Some regulations require physical data separation.
Dedicated (Single-Tenant) Architecture#
In dedicated architecture, each customer has their own database infrastructure, completely isolated from other customers.
Advantages#
Strong isolation: Your data is physically separated from other customers.
Full customisation: You can modify the schema and configuration as needed.
Predictable performance: No noisy neighbour problems.
Compliance simplicity: Easier to demonstrate data residency and isolation.
Disadvantages#
Higher cost: You bear the full infrastructure cost.
Maintenance overhead: Updates must be applied to each instance separately.
Resource inefficiency: Capacity allocated to you cannot be used by others.
NZ/AU Compliance Considerations#
Privacy Act 2020 (NZ)#
The Privacy Act requires reasonable security safeguards for personal information. Multi-tenant architecture is not inherently non-compliant, but organisations must be satisfied that logical separation is adequate.
Privacy Act 1988 (AU)#
Australian Privacy Principle 11 requires reasonable steps to protect personal information. The "reasonable steps" standard may be higher for sensitive data.
Industry-Specific Requirements#
Financial services: APRA (AU) and RBNZ (NZ) may have additional requirements for data isolation.
Healthcare: Health information may require stronger isolation under relevant regulations.
Government: Government agencies may have specific data sovereignty requirements.
Vendor Evaluation Questions#
When evaluating cloud ERP vendors:
- What database architecture do you use?
- How is data isolation implemented and verified?
- What certifications do you hold (SOC 2, ISO 27001)?
- Can you provide dedicated infrastructure if required?
- How do you handle data extraction if we terminate the contract?
Monday Morning Action Plan#
This week:
- Classify Your Data Sensitivity: List all data types in your ERP. Classify as public, internal, confidential, restricted. Multi-tenant may not suit confidential/restricted data.
- Review Your Compliance Posture: Check if Privacy Act 2020 (NZ) or Privacy Act 1988 (AU) requirements mandate physical data separation.
- Ask Your Vendor the Hard Questions: "Where exactly is my data stored?" "Who else's data is on the same infrastructure?" "What happens if another tenant has a security breach?"
- Document Your Customisation Needs: If you need extensive customisation, multi-tenant may constrain you. List your top 10 customisation requirements.
- Check Your Contract for Exit Rights: How do you get your data out? What format? Test the vendor's answer with a real scenario.
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Conclusion: Match Architecture to Requirements#
Multi-tenant architecture is adequate for most organisations and provides cost benefits. However, organisations with sensitive data, specific compliance requirements, or strong customisation needs should evaluate dedicated options.